US securities regulators on Thursday accused Tesla Inc Chief Executive Elon Musk of fraud and sought to remove him from his role in charge of the electric car company, saying he made a series of "false and misleading" tweets about potentially taking Tesla private last month.
Musk, 47, is one of the highest-profile tech executives to be accused of fraud by the Securities and Exchange Commission. Losing its public face and guiding force would be a big blow for money-losing Tesla, which has a market value of more than $50 billion, chiefly because of investors' belief in Musk's leadership.
Tesla shares tumbled 12 percent in after-hours trading.
"Elon is Tesla and Tesla is Elon and that's great when Elon is scoring touchdowns and grand slams but not so great when there are negative things tied to him," said Karl Brauer, executive publisher at Kelley Blue Book. "I don't know how you spin an SEC lawsuit that seeks to remove you from leadership of your own company."
Musk said he had done nothing wrong. "This unjustified action by the SEC leaves me deeply saddened and disappointed," he said in a statement. "I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way."
The SEC's lawsuit, filed in Manhattan federal court, comes less than two months after Musk told his more than 22 million Twitter followers on Aug. 7 that he might take Tesla private at $420 per share, and that there was "funding secured."
In its lawsuit, the SEC said Musk calculated the $420 price per share based on a 20 percent premium over that day’s closing share price and because of the number's slang reference to marijuana. It quoted Musk as saying he thought his girlfriend would find it funny.
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The move to bar Musk as an officer of any public company was a rare move for the SEC against the CEO of a well-known firm. Earlier this year it barred blood-testing company Theranos CEO Elizabeth Holmes after she and the company settled fraud charges with the SEC.
She and former Chief Operating Officer Sunny Balwani were subsequently criminally charged by the San Francisco U.S. attorney's office for fraud.
“The lesson for CEOs is that the rules apply to everyone including highly successful visionaries,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “This is an outlier. Very few CEOs have ever or would ever engage in this kind of action... That’s why the SEC reacted, to make sure it never becomes a trend.”
Musk has long used Twitter to criticise short-sellers betting against his company, and already faced several investor lawsuits over the Aug. 7 tweets, which caused Tesla's share price to gyrate.
According to the SEC, Musk "knew or was reckless in not knowing" that his tweets about taking Tesla private at $420 a share were false and misleading, given that he had never discussed such a transaction with any funding source.
The SEC said Musk met for less than an hour with three representatives of Public Investment Fund, at the company's Fremont, California, plant on July 31 during which the lead representative for the Saudi Arabian sovereign wealth fund expressed interest in taking Tesla private if the terms were "reasonable," according to the lawsuit.
Musk acknowledged the meeting lacked discussion of "even the most fundamental terms" of the deal and nothing was set in writing, according to the lawsuit. Musk then did not communicate with the fund representatives again until three days after his tweets.
On Aug. 24, after news of the SEC probe had become known, Musk blogged that Tesla would remain public, citing investor resistance.
Thursday's lawsuit also seeks to impose a civil fine and other remedies. The SEC does not have criminal enforcement power. It said Musk would remain as Tesla's CEO until the matter was settled legally.
The lawsuit does not preclude action by the Department of Justice, according to one person with knowledge of the SEC's thinking. Tesla disclosed earlier this month that it was answering questions from the Justice Department.
“This sucks," said Ross Gerber, president and CEO at Gerber Kawasaki Inc, which owns 41,000 Tesla shares. "Don’t think this has ever happened to a CEO before. Have no idea where this will go."
Emergency
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Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5
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Directors: Carol Mansour and Muna Khalidi
Stars: Dr Ghassan Abu-Sittah
Rating: 4/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Email sent to Uber team from chief executive Dara Khosrowshahi
From: Dara
To: Team@
Date: March 25, 2019 at 11:45pm PT
Subj: Accelerating in the Middle East
Five years ago, Uber launched in the Middle East. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that’s become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey—well, it’s more like a leap, and a big one: in a few minutes, we’ll announce that we’ve agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I’ve gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products—from digital payments to food delivery—to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don’t expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams’ day-to-day operations post-close. Today’s news is a testament to the incredible business our team has worked so hard to build.
It’s a great day for the Middle East, for the region’s thriving tech sector, for Careem, and for Uber.
Uber on,
Dara
